There is no substitute for a culture of integrity in organizations. Compliance alone with the law is not enough. History shows that those who make a practice of skating close to the edge always wind up going over the line. A higher bar of ethics performance is necessary. That bar needs to be set and monitored in the boardroom.  ~J. Richard Finlay writing in The Globe and Mail.

Sound governance is not some abstract ideal or utopian pipe dream. Nor does it occur by accident or through sudden outbreaks of altruism. It happens when leaders lead with integrity, when directors actually direct and when stakeholders demand the highest level of ethics and accountability.  ~ J. Richard Finlay in testimony before the Standing Committee on Banking, Commerce and the Economy, Senate of Canada.

The Finlay Centre for Corporate & Public Governance is the longest continuously cited voice on modern governance standards. Our work over the course of four decades helped to build the new paradigm of ethics and accountability by which many corporations and public institutions are judged today.

The Finlay Centre was founded by J. Richard Finlay, one of the world’s most prescient voices for sound boardroom practices, sanity in CEO pay and the ethical responsibilities of trusted leaders. He coined the term stakeholder capitalism in the 1980s.

We pioneered the attributes of environmental responsibility, social purposefulness and successful governance decades before the arrival of ESG. Today we are trying to rebuild the trust that many dubious ESG practices have shattered. 


We were the first to predict seismic boardroom flashpoints and downfalls and played key roles in regulatory milestones and reforms.

We’re working to advance the agenda of the new boardroom and public institution of today: diversity at the table; ethics that shine through a culture of integrity; the next chapter in stakeholder capitalism; and leadership that stands as an unrelenting champion for all stakeholders.

Our landmark work in creating what we called a culture of integrity and the ethical practices of trusted organizations has been praised, recognized and replicated around the world.


Our rich institutional memory, combined with a record of innovative thinking for tomorrow’s challenges, provide umatached resources to corporate and public sector players.

Trust is the asset that is unseen until it is shattered.  When crisis hits, we know a thing or two about how to rebuild trust— especially in turbulent times.

We’re still one of the world’s most recognized voices on CEO pay and the role of boards as compensation credibility gatekeepers. Somebody has to be.

Question for Secretary Geithner: What Does “Recuse” Mean?

New York Times

In his sworn testimony today before the House Committee on Oversight and Government Reform, U.S. Treasury Secretary Timothy Geithner reasserted that he had recused himself from making any decision in connection with AIG payments to Goldman Sachs in November 2008.  But he also testified that he was made aware by Fed officials that the payments had been made.  He knew this at a time when it was not public information and even Congress itself had been kept in the dark.

Some scepticism has been expressed on these pages before about the credibility of this scenario.

I have had some experience over the years in advising government agencies and public officials about issues related to conflict of interest and when there is a need to step aside.  When they do, they keep out of any aspect of the matter; they don’t get updates and briefings on the decision in which they did not take part.

The Committee needs to dig deeper into what the details of Mr. Geithner’s recusal were and what legal advice he had on that subject.  It also needs to look more carefully at what the mechanism was by which he became aware of the AIG counterparty decision – and why he felt he should be kept in the loop on the decision from which he says he removed himself.

The Other AIG Outrage

Secret side deals involving billions in public funds funneled to giant banks is no way to establish confidence or to advance transparency in a crisis that yearns for both.

Finally, some in the U.S. Congress have begun to take note of the fact that among the $175 billion in bailouts AIG received, billions were redirected to institutions like Goldman Sachs and Société Générale SA.  Few questions on this subject were asked of U.S. Treasury secretary Timothy F. Geithner and Fed chairman Ben S. Bernanke during their appearance today before the House Committee on Financial Services.  As we pointed out first on these pages a couple of weeks ago (even before The New York Times raised the issue of the non-haircut payments), it is curious that these counterparty transactions were made for 100 percent on the dollar.

As we said on March 7th:

Could these institutions have accepted, in the circumstances, say, 50 or 70 cents on the dollar?  It seems not.  Nothing but the full amount will do, even if it has to be paid with taxpayer dollars, once more. This, it appears, is what is meant by “systemic.”  

These are the kinds of details the Fed did not want the public to know.  It is another reason that prompts us to question the judgment being employed here, and the dire warnings that have been made that this bank or that insurance company was too big to fail and that the consequences would shake the world. It also makes us wonder whether the Fed really understands the dangers involved in the ever-expanding stack of trillions being invested, loaned out or printed that it says are needed.  Is it possible that this is where the real systemic risks lie, with a government leverage bubble?

Secret side deals involving billions in public funds funneled to giant banks is no way to establish confidence or to advance transparency in a crisis that yearns for both.  Outrageous as the AIG bonuses were, they were apparently symptomatic of a much darker and less than candid side on the part of the Fed and other decision makers that needs to be pursued by an alarmed public with equal vigor.

Bonfire of the Insanities: An Essay on AIG and Wall Street’s Culture of Entitlement

AIG’s bonuses have become more than just a tipping point for a long simmering resentment over executive compensation.  They have become an entire gravitational force field of umbrage at the greed, arrogance and now horrifically costly stupidity on the part of these Wall Street masters of the universe, as they preferred to be called in times of a calmer CBOE volatility index.

(Wall Street tycoon)

We are shocked, shocked, to find government trying to interfere with free market capitalism.

(Government official)

Here is your share of the TARP bailout, sir. 

(Wall Street tycoon)

Thank you very much.

Recent events make it easy to imagine such a remake of Captain Renault’s iconic lines from the classic film, Casablanca.  But even the highly creative Epstein brothers, who wrote the original screenplay, would have trouble accepting that the hypocrisy uttered on Wall Street today would make for credible dialogue.   Believe it. (more…)

AIG Board Strikes Out -Again

One might think that in a company that lost $100 billion over the past year and required three taxpayer bailouts totaling $175 billion, its directors would have moved heaven and earth to avoid this kind of reputation-stinging disaster.  As it is, there is little evidence that anyone has even turned on the lights in the boardroom.

It’s spring training once more for the AIG Dodgers, otherwise known as the board of directors of the giant insurance company.  Their full-time occupation seems to be dodging responsibility for what is happening in the company and avoiding taking charge of its governance. (more…)

Has AIG Become the Bernie Madoff of the Bailout Boondoggle?

If the Obama administration and the entire legislative branch are powerless to say no to such outrageous grabs for bonus cash in this failed company, there can be little hope that they will be able to navigate out of the larger financial storm or restore the confidence that is essential for recovery.

If there is one face that has come to symbolize the greed, excess and betrayal of the current financial era, it is Bernie Madoff, the self-admitted felon who is now in jail awaiting sentencing for his multi-billion dollar Ponzi scheme. But a close second is surely insurance giant AIG, the serial recipient of the bailout bonanza with a junket-hopping tendency and a board of directors that is apparently also genetically incapable of doing the right thing. Not only did this operation lose $100 billion in the past year, but the architects of the disaster insist that they are entitled to a further $165 million in bonuses. What is worse, so does the United States government. (more…)

Outrage of the Week: AIG and the Curse of Darkness

outrage 121.jpgLack of daylight in boardrooms and in the way business was done on Wall Street and in the financial sector is what brought this company and the world to this perilous and costly state. Darkness and a lack of transparency are still being employed today under the guise of bringing a solution to the problem and in failing to disclose who the real beneficiaries of American taxpayer dollars are.

It has been asserted that the directors of AIG did not fully understand what a small unit within the organization, which was responsible for spinning out hundreds of billions of dollars in credit default swaps and other derivatives products, was doing. According to them, they were kept in the dark, so to speak. Throughout much of the financial sector, excesses in leverage and in the syndication of risk were also taking place. Regulators did not fully appreciate the extent of the risk or the complexity of these special investment vehicles. They are of the view that they, too, were kept in the dark. They are not alone. A lack of daylight has also brought serious injury to millions of investors who trusted banks to operate in a sound manner, but alas discovered a lot of gambling going on behind their backs in respect of investment devices, obligations and transactions that were taking place in the dark of night and without full disclosure to shareholders. (more…)